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Wealth Management firms are reporting that their millennial clients are asking about this more than ever. Statistics show it grew 13% from 2007 to 2010, and about 1 of every 8 dollars under professional management are invested this way.

It’s social investing and it’s growing faster than you would believe. What is it?


What is Social Investing?

 
Photo Credit: www.usnews.com

Millennials, people born between 1981 and 1997 (roughly) are highly concerned about social issues. They believe the planet was mistreated by their ancestors; that people deserve to be treated fairly, and that it’s not enough just to talk about—they have to do something about it.

One way to take a stand is to not purchase from or invest in a company that doesn’t uphold their values. If they believe that big oil companies are damaging the environment, they won’t invest in Exxon or BP regardless of how well the stock should perform over time.

Or maybe a tobacco company would never see a dollar of your money.

This is social investing. Whatever your convictions, your portfolio reflects your stance.

What Else is Out There?

Whatever cause you’re passionate about, there’s a way to build a portfolio around it. U.S. Trust, the high net worth banking arm of Bank of America created the S2I Strategies that align with environmental, social, and governance principals. The bank has strategies for investors looking for portfolios that align with their religious beliefs, diversity in the company’s workforce, a Women and Girls Equality strategy, and an environmental stewardship fund.

How to Do It

The easiest way is through a mutual or exchange traded fund. The KLD 400 Social Index fund (DSI) invests in “U.S. companies that have positive environmental, social, and governance characteristics.” The fund’s largest holding is Procter & Gamble along with Verizon, Disney, Giiead Sciences, and Merck & Co. The fund is up nicely in 2015 and has an expense ratio of 0.5%.

Another way to invest is to research socially responsible stocks and purchase a basket of stocks that fit that criteria.

Apple, for example, is the single largest holding of socially responsible mutual funds because of it’s stance on LGBT issues and its progress in cleaning up it’s overseas labor practices. Apple’s rival, Google, is well-liked by socially responsible investors too. It’s company motto is, “Don’t be Evil.” That has to count for something, right? Others include Nestle, Praxair, Qualcomm, and Texas Instruments.

The Challenges

But finding socially responsible companies on your own isn’t an easy task. There are plenty of articles online listing the most socially responsible companies but what qualifies as “responsible” varies from person to person. Companies like Apple publish information about its progress but that’s not true of many companies.

There’s also the problem of performance. What if the most socially responsible companies aren’t performing well? Do you sacrifice performance—arguably the most important metric of any portfolio?

Bottom Line

Responsible investing is gaining momentum. Creating a portfolio completely based on your values won’t be easy but there are plenty of well performing companies that are doing what they can to give back.



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